Who would buy Twitter?

published 30 September 2016

813-Dorsey-1200 — Jack's back: but new ideas have not been forthcoming

It's hugely popular, but the social-media platform has never turned aprofit. Suitors are circling nevertheless

Shares in microblogging platform Twitter shot up by more than 20% in the last week after rumours began circulating that it could be sold. With shares at around $23 below their float price of $26 and almost half their peak of almost $45 the company is valued at $20bn.

Twitter may seem like a huge success it boasts 313 million monthly users but it has never made a profit, and growth has effectively ground to a halt. The number of users isn't rising much at all, and the ones it has are spending "far less" time on its service than on rivals such as Facebook and Snapchat, says The Economist.

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A year ago, after a "string of departures by senior executives", CEO Dick Costolo was replaced by Twitter's co-founder, Jack Dorsey (pictured), who had been forced out of the company in 2008. But despite his return, Twitter has "failed to come up with the new ideas needed to reach a wider group of users", according to Richard Waters and Tim Bradshaw in the Financial Times.

"It's hard to see why anyone would want to buy Twitter," says Jim Armitage at the Evening Standard, unless it is sold "for a song". It may be worth its "current rumour-swollen value" if it was "a business that was growing its number of users exponentially. But it's not." However, both Google and cloud-computing company Salesforce are said to be interested, along with other suitors including Microsoft (which outbid Salesforce for LinkedIn), Verizon (which owns AOL), Disney and Apple.

Twitter would be an "excellent fit" for Salesforce, says Ron Miller on Techcrunch. com. One of its main attractions, says Waters and Bradshaw, is the "real-time information it can supply to corporate marketers about millions of their consumers" although the arguments for owning Twitter "are not as strong as those for buying LinkedIn", and Salesforce "might find it hard to sell a deal to its own shareholders".

But Google is "the sort of acquirer who would be able to reap the most immediate value from a deal" as it is able to "instantly boost profit margins, taking out costs and pumping its own advertising into the network", making Twitter "a new growth engine for Google's advertising business".

Despite its many problems, Twitter is still an "attractive asset" with a "treasure trove of untapped data", agrees Steve Kovach on BusinessInsider.com. It could still "flourish under a parent company that provides additional resources and leeway". However, the firm needs to sell itself now. If not, it risks the same fate as Yahoo "a decade-long stagnation" followed by "a desperate sale for a tiny fraction of its peak valuation". Yahoo was once valued at $125bn; in July this year, it agreed to be bought by Verizon for $4.8bn.

Holiday firms battle headwinds

"The summer seasonhas progressed largelyas expected," said PeterFankhauser, Thomas Cook'schief executive. "Customers'desire to go abroad onholiday has remainedstrong with the exceptionof Turkey." The firm'sshares rose ahead of theannouncement, but later fellback. They have dropped bymore than 40% this year.

While Thomas Cookbattles on through marketheadwinds, budget airlineMonarch appears to bestruggling. The firm wasforced to deny rumours itwas on the verge of collapse.Monarch went "cap in handto private equity ownersGreybull", says The DailyTelegraph, to ask for "moremoney to help see it throughthe long winter season". That"sparked fears of bankruptcyand concern that travellerscould be left stranded". It'snot the first time this yearthat Monarch has needed acash injection, having tappedinvestors for £35m in short-termfunding in June.

Ben studied modern languages at London University's Queen Mary College. After dabbling unhappily in local government finance for a while, he went to work for The Scotsman newspaper in Edinburgh. The launch of the paper's website, scotsman.com, in the early years of the dotcom craze, saw Ben move online to manage the Business and Motors channels before becoming deputy editor with responsibility for all aspects of online production for The Scotsman, Scotland on Sunday and the Edinburgh Evening News websites, along with the papers' Edinburgh Festivals website.

Ben joined MoneyWeek as website editor in 2008, just as the Great Financial Crisis was brewing. He has written extensively for the website and magazine, with a particular emphasis on alternative finance and fintech, including blockchain and bitcoin. As an early adopter of bitcoin, Ben bought when the price was under $200, but went on to spend it all on foolish fripperies.